Tax System in Indonesia: The Taxes a Business Pays

The tax system in Indonesia is self-assessed. A business works out, pays and reports its own taxes without waiting to be assessed, and the Directorate General of Taxes checks the returns and can assess a different amount (General Provisions and Tax Procedures Law, or KUP, Article 12). Since 1 January 2025 that work has run through Coretax, the tax office’s online system. A company’s tax number there is its 16-digit NPWP (Nomor Pokok Wajib Pajak), and a resident individual’s is their national identity number, as explained in the 16-digit NPWP.

Each section below says what a tax is and who bears it, then points to the page that covers it in full.

The taxes at a glance

	Who it falls on	Rate	Set by
Corporate income tax	A resident company or permanent establishment, on taxable profit	22%	Income Tax Law, Article 17(1)(b)
Final tax on turnover	Individuals, single-founder individual companies and cooperatives, with turnover up to IDR 4.8 billion	0.5% of turnover	PP 55/2022, as amended by PP 20/2026
Branch profit tax	A permanent establishment, on profit after corporate tax	20%, unless reinvested	Income Tax Law, Article 26(4)
Individual income tax	A resident individual, on taxable income	5% to 35%, in 5 bands	Income Tax Law, Article 17(1)(a)
Tax on pay (PPh 21)	Employees, withheld by the employer	A monthly effective rate, by category	PP 58/2023
Withholding tax	The recipient of a payment, withheld by the payer	Depends on the payment	Income Tax Law, Articles 4(2), 23 and 26
VAT	The buyer, charged by a VAT-registered business	12%, on a reduced base for most supplies	VAT Law, Article 7; PMK 131/2024
Land and building tax	The owner or user of land and buildings	Up to 0.5% of assessed value, set by the region	UU 1/2022, Article 41
Acquisition duty	Whoever acquires land or buildings	Up to 5% of acquisition value, set by the region	UU 1/2022, Article 47

Who the tax system in Indonesia treats as resident

A company is resident if it is established or domiciled in Indonesia. An individual becomes resident on any one of three tests (Income Tax Law, Article 2(3), as amended by UU 6/2023), which are set out for someone relocating in moving to Indonesia.

Income tax on the company

Corporate income tax

A resident company with gross turnover up to IDR 50 billion pays half the corporate rate on the taxable income that comes from its first IDR 4.8 billion of turnover (Article 31E). A tax loss can be carried forward against profit for 5 years (Article 6(2)). A PT PMA, a foreign-owned limited liability company, is a resident company like any other. Preparing and filing the return is corporate tax work.

The 0.5% final tax on turnover

A final tax of 0.5% of gross turnover replaces income tax on profit for some smaller businesses with turnover up to IDR 4.8 billion a year (PP 55/2022, Articles 56–57, as amended by PP 20/2026). An individual pays nothing on the first IDR 500 million of turnover (Article 7(2a)).

Branch profit tax

A foreign company operating through a permanent establishment rather than a PT pays a further 20% on its profit after corporate tax, unless that profit is reinvested in Indonesia (Article 26(4)). A PT PMA is an Indonesian company, so it does not pay this tax.

Taxes the company withholds or collects

Tax on employees’ pay (PPh 21)

An employer withholds income tax (Pajak Penghasilan Pasal 21, or PPh 21) from pay every month and settles the year in the last month. How the monthly rate is found is explained in PPh 21 effective rates, and the cost of an employee calculator works it through for one salary.

Withholding on payments to suppliers

A company that pays for services, rent, royalties or interest often withholds tax from the payment and pays it to the state. The rate depends on what is paid for and whether the recipient is in Indonesia. A treaty can lower tax on a payment abroad, but only if the recipient has given the payer a certificate of domicile first (PER-11/PJ/2025, Article 21(2)). The detail is in withholding tax on services.

VAT

A business registered for value added tax charges it on what it sells and pays it over to the state. A small business below the registration threshold may still register voluntarily (PMK 81/2024, Article 60(3)). Exports are charged at 0% (VAT Law, Article 7), which is not the same as being exempt. The VAT calculator shows how the tax is worked out.

Tax on individuals

A resident individual pays income tax in five bands, from 5% to 35% (Article 17(1)(a)), and files an annual return. Preparing that return for directors and expatriates is personal tax work.

Tax on land and buildings

Two regional taxes apply to property. Land and building tax is capped at 0.5% of assessed value, and acquisition duty on acquiring land or buildings is capped at 5% of the acquisition value. Each region sets its own rate within those caps (UU No. 1 of 2022, Articles 41 and 47).

When the tax office asks questions

A letter asking a company to explain its figures is not an audit. How to answer one is in the SP2DK letter explained, and what happens when the tax office does examine a return is in the Indonesian tax audit procedure.

What it means for a new company

A newly established PT PMA meets most of this from its first months: withholding on the pay and the services it buys, VAT once it registers, and its first annual corporate return. The dates each falls due are on the Indonesia compliance calendar, and the full list of what a company files is in the compliance checklist for businesses.